Financial advisors have always approached their business plans by looking to expand into related industries. The difference is that in the past they have had to become experts in what are very knowledge-intensive and labor-intensive fields, while today, technology is changing everything!

Why now?

Regulations are pushing small plans toward advisors, and creating a great need for advisor support. The small market is huge, and will dominate the space for years to come. This new market reality makes it vital that practices build efficiencies that make it easier for them to serve this crowd.

Additionally, many firms are making efforts to capture a greater share of assets from their wealthy clients. Since many of them are business owners, it creates an opportunity for advisors to expand their wealth management practices by pairing it with services for businesses, primarily retirement benefits.

Today, it’s easier than ever to take on small plan business. Digital recordkeepers like 401GO have automated and integrated every aspect of the 401(k) plan process, creating a much more hands-off experience, both for advisors and for business owners.

What’s next?

The most important decision the advisor can make is to pick the right partner. With so much M&A activity happening in the recordkeeping industry, there are fewer options to choose from. Closely examining industry platform partners has become a crucial step. Look for stable and modern technology, tech-based integrations with payroll, and quality of support.

I often recommend advisors review their existing clients to determine how much potential already exists with their book of business to create an additional stream of revenue with retirement plans. Expanding services doesn’t necessarily require intense prospecting, and it’s likely to be more effective when it’s beneficial to the core practice.

With the retirement space growing significantly and the aging advisor market, the country doesn’t have enough advisors to meet demand. Technology is increasingly important to help existing and incoming advisors become efficient and effective.

Who can help? 

How can wealth advisors start leveraging wealth, insurance or benefits services to expand their plan practice? And who can help? 401GO was built to help make the retirement plan business easier and less expensive for all stakeholders, including business owners, employees, and their financial advisors. Whether you need a solo plan, start-ups, conversion plans, or even cash balance plans, you can get a streamlined experience by working with 401GO.

Convergence is a powerful trend in the financial services market and will provide a significant advantage to both experts and novice plan advisors alike—if you choose the right partners. If you’re interested in learning how we help all our advisor partners grow their plan business let us share how our cutting-edge recordkeeping technology, along with our award-winning service model, can help build stronger wealth practices.

The post How Retirement Planning Can Transform Your Wealth Management Practice appeared first on Fast and Affordable 401k for growing businesses.

Unlike traditional pension plans, where benefits are defined as a monthly payment upon reaching Normal Retirement Age (NRA), cash balance plans define benefits as a hypothetical account balance paid upon reaching NRA. Employees are credited each year with both a “pay credit,” which is either computed based on a percentage of the employee’s wages or a fixed dollar amount, and an “interest credit,” which is a guaranteed rate as defined by the plan (usually 4% – 5%). The performance of the plan affects the calculation of the contributions needed to meet the obligation, and it is the plan sponsor — not the participants — that bear the risk.

Advantages of Cash Balance Plans for Small Businesses

1. Tax Efficiency: Business owners and Highly Compensated Employees (HCEs) can receive substantial annual contributions — much larger than they can using a 401(k) — which grow tax-deferred, yielding significant benefits. This is especially valuable for high income earners and sole proprietors needing to decrease their tax burden.
2. Additional Employee Benefits: When owners offer a cash balance plan to employees alongside a 401(k), they make the retirement benefits package much more appealing, which is especially beneficial to small business owners working to attract and retain talent.
3. Legal and Insurance Protection: Cash balance plans are protected under ERISA law, which shields them from bankruptcy and creditors. For most employers, the benefits are insured by the Pension Benefit Guaranty Corporation (PBGC). 
4. Plan Design Flexibility: Small businesses can design them to meet their unique needs, including varying contribution levels for different employees. Often, cash balance plans are combined with 401(k) profit-sharing plans to further maximize savings.

It’s easy to see why cash balance plans have increased in popularity, especially among small businesses, as they allow owners to accelerate retirement savings while reducing tax liabilities. Meanwhile, cash balance plans tap into business cash flow, benefiting both owners and employees.

Is a Cash Balance Plan Right for Every Small Business?

Cash balance plans can be very beneficial for small businesses, but they’re not right for some. Consider these factors when making your decision.

1. Complexity and Cost: Setting up and maintaining a cash balance plan can be complex and costly. Small business owners often lack the resources to hire the legal, financial and HR professionals needed to navigate the requirements associated with these plans. A technology enabled provider such as 401GO is able to overcome these issues.
2. Employee Demographics: Younger workers tend not to stay long at any one job, and this is even more likely to be true when employed by a small business. They are less portable than 401(k) or IRA plans, as payouts are done annually when the plan reporting is prepared. The lack of ready access may make cash balance plans less attractive to younger workers. 
3. Cash Flow: These plans require consistent funding. Businesses in industries that are more volatile, seasonal or more likely to confront limited cash flow may find it difficult to contribute consistently. Plan sponsors may incur penalties until minimum funding requirements are met.
4. Business Size: Although cash balance plans benefit small businesses, they are most effective for businesses with stable revenue streams. Very small or highly volatile businesses may not find them advantageous.

Who Can Help Small Businesses and their Advisors Explore Cash Balance Plans?

401GO is the retirement plan provider optimized for small businesses. We leverage technology to make designing and building business-sponsored retirement plans fast and affordable, whether it’s a solo plan, 401(k), 403(b), or a cash balance plan.

Our technology and flexible pricing make it easy for financial advisors to get their small business clients into cash balance plans quickly and profitably.  If you’re a seasonal financial advisor in this space or brand new to the plan world, let us share how our cutting-edge technology and award-winning service model, able to help your small business owner clients take advantage of this exciting but underutilized plan design.

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